Beruflich Dokumente
Kultur Dokumente
december 2010
literature
algorithmic trading: Foucault and Menkveld (2008), Hendershott,
Jones, and Menkveld (2010), Chaboud, Chiquoine, Hjalmarsson, and Vega
(2009), Hendershott and Riordan (2009), Biais and Weill (2010)
questions
questions
questions
questions
timeSpreads
trend bid-ask
spread
for the
long
run
Proportional spread
1.20%
1.00%
0.80%
0.60%
0.40%
0.20%
0.00%
1900
1910
1920
1930
1940
1950
10
1960
1970
1980
1990
2000
!"#$%"%&'()*+%'((,%"-%+*&*#-%./)-(+0
time
trend bid-ask spread (ctd)
nyse
value-weighted
average
effective
spread
Figure
1. NYSE
value-weighted
proportional
effective
spreads
0.25%
0.20%
0.15%
0.10%
0.05%
0.00%
1994
1995
1996
1997
1998
1999
2000
11
2001
2002
2003
2004
autoquote was phased in, i.e. December 2, 2003, through July 31, 2003. We use the exogenous no
to identify
causality from algorithmic
for the endogenous
algo trad t/o,
iv regression
including
volatility,
price,trading
andto liquidity.
size We est
it
where Lit is a spread measure for stock i on day t, Ait is the algorithmic trading measure algo tra
share turnover,
market
Lit volatility,
= i +1/price,
t +and
Alog
Xitcap.
+ We
it always include fixed effects and time
it +
all explanatory variables, except that we replace algo tradit with auto quoteit . We regress by q
that are robust to general cross-section and time-series heteroskedasticity and within-group auto
Q2
Q3
Q4
Q5
Coefficients on
vola
share
turnoverit tility
-2.80**
(-3.01)
-5.16
(-0.64)
-1.01**
(-2.32)
0.90*
(9.70
-1.64
(-1.87
0.69*
(9.51
1.03**
(2.06)
-1.39**
(-2.06)
3.13*
(1.92)
-4.12**
(-2.24)
-1.06*
(-2.15
1.75*
(3.29
14.26
(0.46)
-15.48
(-0.47)
15.88
(1.36)
-11.21
(-1.33)
details). As the LSB decomposition limits persistence to that of an AR(1) process, we also estimate a H
of the trade-related (stdev tradecorr compit ) and trade-unrelated (stdev nontradecorr compit ) comp
transactions (see Section 3.3.2 and Hasbrouck (1991a, 1991b) for details). For the regressions, we use
autoquote to instrument for the endogenous algo tradit to identify causality from algorithmic trading
estimate
M = + + A + X +
it
it
it
Mitor=Hasbrouck
i + component
+stock
Xiti +
t + Ait for
it t, Ait is the algorithmic trading me
where Mit is a LSB
on
day
including share turnover, volatility, 1/price, and log market cap. We always include fixed effects and ti
in the Hasbrouck component regressions. We regress by quintile and report t-values based on standar
and time-series heteroskedasticity and within-group autocorrelation (see Arellano and Bond (1991)).
Coefficient on algo tradit
Q1
Q2
Q3
Q4
Q5
0.69**
(2.26)
-0.84**
(-2.14)
-0.21
(-1.60)
9.91
(0.46)
-12.19
(-0.46)
0.66
(0.28)
8.97
(1.36)
-7.72
(-1.32)
3.30
(1.21)
-0.30*
(-1.69)
0.13
(1.47)
-3.39
(-0.30)
1.03
(0.28)
-0.57**
(-2.73)
0.13
(1.12)
Coefficien
v
share
turnoverit t
2.35**
(2.07)
-2.58*
(-1.85)
-0.82**
(-2.33)
14
main findings
middlemen quickly process public news which in theory
solves no-trade deadlock between uninformed early investor
and informed late investor who trade through take-it-or-leave-it
(limit) orders (+)
creates adverse selection if both investors are uninformed (-)
15
main findings
middlemen quickly process public news which in theory
solves no-trade deadlock between uninformed early investor
and informed late investor who trade through take-it-or-leave-it
(limit) orders (+)
creates adverse selection if both investors are uninformed (-)
16
main findings
middlemen quickly process public news which in theory
solves no-trade deadlock between uninformed early investor
and informed late investor who trade through take-it-or-leave-it
(limit) orders (+)
creates adverse selection if both investors are uninformed (-)
17
main findings
middlemen quickly process public news which in theory
solves no-trade deadlock between uninformed early investor
and informed late investor who trade through take-it-or-leave-it
(limit) orders (+)
creates adverse selection if both investors are uninformed (-)
18
main findings
middlemen quickly process public news which in theory
solves no-trade deadlock between uninformed early investor
and informed late investor who trade through take-it-or-leave-it
(limit) orders (+)
creates adverse selection if both investors are uninformed (-)
19
main findings
middlemen quickly process public news which in theory
solves no-trade deadlock between uninformed early investor
and informed late investor who trade through take-it-or-leave-it
(limit) orders (+)
creates adverse selection if both investors are uninformed (-)
20
trailer
one brokers net position in ing on jan 30, 2008
21
variable (units)
corr
type
CAPM R2 (%)
between
0.67
0.75
middleman
relative
use of
passive
orders
0.07
(0.27)
(0.27)
(0.27)
within
(0.27)
0.46
(0.05)
0.13
0.04
0.23
(0.04)
(0.07)
(0.08)
0.89
(0.27)
0.41
(0.05)
0.53
(0.27)
0.78
between
within
between
within
middleman
participation
rate
chi-x
share
#trades
(0.27)
0.08
0.20
(0.05)
(0.05)
0.23
0.67
(0.27)
0.15
(0.05)
(0.27)
0.05
(0.04)
between
0.52
within
0.02
(0.27)
(0.04)
14 stocks, 77 days
23
79.1%
60.0%
40.0%
25.1%
20.0%
0.0%
2005
2009
Secon
19.4%
NASDAQ
7.9%
Dark Pools
1.0%
Other ECN
9.8%
Direct Edge
14.7%
NYSE
3.7%
Other Exchange
3.3%
NASDAQ OMX BX
13.2%
NYSE Arca
9.5%
BATS
NASDAQ
BATS
ECN: 2 Direct Edge
Broker-Dealer Internalization More than 200
NYSE
NASDAQ OMX BX
ECN: 3 Others
NYSE Arca
Other Registered Exchange
Dark Pools Approximately 32
25
26
Q1
Q2
Q3
Q4
All
54%
22%
10%
23%
27%
37%
15%
5%
19%
19%
27
0.8
AABA (Q1)
RDA (Q1)
INGA (Q1)
AGN (Q
PHIA (Q1)
KPN (Q2)
AKZA (Q2)
MOO (Q
REN (Q2)
TPG (Q3)
WKL (Q3)
VNUA (Q3)
BUHR (Q4)
0.4
IHC (Q4)
HEIA (Q2)
AH (Q2)
GTN (Q3)
ASML (Q2)
HGM
(Q4)
DSM
(Q3)
0.00
0.05
0.10
0.15
0.20
0.25
0.30
0.35
0.40
Proportion SORS, (1i)
28
0.45
0.50
0.55
0.60
0.65
29
25
20
15
10
start Chi-X
Mar 2007
Jun 2007
5
Sep 2007
Dec 2007
Mar 2008
start Chi-X
Mar 2007
Jun 2007
Sep 2007
30
Dec 2007
Mar 2008
15
10
5
0
5
100
50
8
462
02
46
1080
50
1.0
0.8
0.6
0.4
0.2
0.0
0.2
0.4
0.60
100
150
200
100
150
200
50
100
150
days from Sep 04, 2007, to Jun 17, 2008
200
chi-x only
31
large stocks
panel A: gross profit
1649
small stocks
all stocks
55
1416
(50, 2751)
(47, 125)
(50, 2751)
0.99
0.19
0.88
(0.15, 1.62)
(0.18, 0.78)
(0.18, 1.62)
0.69
0.61
0.68
(0.90, 0.30)
(1.79, 0.07)
(1.79, 0.07)
1.68
0.80
1.55
(0.76, 2.15)
(0.25, 1.64)
(0.25, 2.15)
266
51
235
(50, 389)
(12, 70)
(12, 389)
95
18
84
(18, 139)
(4, 25)
(4, 139)
1545
410
1379
(73, 762)
(73, 2442)
(369, 2442)
461
89
407
(88, 674)
(21, 122)
(21, 674)
(2.39, 2.71)
(2.39, 17.60)
11.56
9.73
11.30
(8.27, 25.71)
32
6.90
(1.53, 17.60)
(4.20, 27.37)
(4.20, 27.37)
10.87
1.21
9.46
(2.93, 14.86)
(2.94, 4.60)
(2.94, 14.86)
december 2010
33
34
35
Li, Y. (1996).
Middlemen and private information.
Journal of Monetary Economics 42, 131159.
Masters, A. (2007).
Middlemen in search equilibrium.
International Economic Review 48, 343362.
Securities and Exchange Commission (2010).
Concept release on equity market structure.
Release No. 34-61358; File No. S7-02-10.
Menkveld, A. J. (2010).
High frequency trading and market structure.
Manuscript, VU University Amsterdam.
Rosu, I. (2006).
A dynamic model of the limit order book.
Manuscript, University of Chicago.
Rubinstein, A. and A. Wolinsky (1987).
Middlemen.
Quarterly Journal of Economics 102, 581593.
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